Gold And Silver Physical Market And Inventory Update From The Source: "In A Word, Ugly"

By now everyone and their kitchen sink has speculated on what caused the great precious waterfall which started on April 12 and continued for the next four days. The factual reason for the biggest gold down days in history will likely remain unknown. In fact, in a sea of unfounded opinions, the only thing missing so far has been an informed opinion on what is really happening in some market - be it the paper of physical, especially in the aftermath of the unprecedented scramble to buy physical, not paper, gold and silver. So to avoid further speculation, and focusing on fact, here is what the CEO of Texas Precious Metals has to say about the state of the actual physical market, not the one where one can create "gold" and "silver" out of thin air. The bottom line? "The physical silver market is, in a word, ugly" and more importantly, "Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion." Botton line: please keep selling your paper metals - the demand in the physical space has never been greater, and is absorbing all the available inventory at current prices.

As you all know, it has been a remarkable (and historic) week in the metals market, with metals prices falling precipitously. In the past two weeks, we have sold over 350,000 ozs of silver and 11,000 ozs of gold, which (as you can tell from our website) has placed an enormous strain on inventory levels, not to mention our loyal staff. As of today, we are completely sold out of silver. The purpose of this letter is to update you on inventory levels and the state of the physical market from our vantage point.

First of all, as our faithful customers know, we are the only bullion dealer in the country that promises to ship orders no later than three (3) business days from receipt of payment*. Our motto is: "If we don't have it, we don't sell it." Or, as one of our traders likes to put it: "we sell metal, not promises." Our business philosophy is strict and logistically quite difficult given the high security of bullion transport and packaging. We firmly believe in the importance of expedited order processing because of the high level of trust our customers place in our company. We are an anomaly in the industry, and we are proud of it.

Before I comment on the state of the market, I want to extend a tremendous debt of gratitude to our vault and shipping staff, who continue to pull 18-hour days (working through the weekends) to meet our commitments to customers. Given the sheer volume of orders, most orders are now shipping on day #3 from payment date, but we are extremely proud to report that, as a company, there have been no logistical disruptions of any major significance. Way to go staff!

The physical silver market is, in a word, ugly. There is no telling at this point when mint inventories will return to normal, but you can be sure it will not happen within the next 8 weeks. Most dealers, at this point, are selling their current customer demand forward, meaning they are selling product they do not presently have, expecting to pull from future mint allocations. Consequently, future allocations will face pressure from today's demand. It is not my intent here to comment on the business practices of other companies, but I will say that no one can possibly predict future allocations at the time. The US mint, for example, releases its allocations weekly, and until then, dealers have no insight into allocation levels. Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion. However, we stand by the notion that it is better to lose a sale than lose a customer by delaying delivery two months (or more).

Here is what we know about future inventories:

US MINT: Like most government institutions, the US Mint is highly unreliable. This week, we will take delivery of only 13,000 silver eagles. These coins will post for sale on Tuesday, April 23rd, at 8am CST, and ship as early as Friday**. On the week of April 29th, we will offer a minimum of 21,000 silver eagles, which will also post for sale on the Tuesday of the week. Subsequently, based on corporate agreements, minimum weekly allocations will not dip below 20,000 coins. Unfortunately, due to the extreme supply/demand constraints imposed on our business by the shortage of product, we will be offering eagles in monster box form (500 coins) only until allocations exceed demand. Coin premiums will be higher than normal, but our aim is to keep these premiums as far below market rate as possible.

On gold, there is some tightness in the Gold Buffalo series, but as of the writing of this message, Eagles are in fair supply.

CANADIAN MINT: As mentioned in an earlier posting, the Canadian Mint has been under pressure to meet demand because of the small eagles allocations and because of the minting disruption caused by the Wildlife Series last month. It will be weeks before the mint catches up to demand. We will receive, at a minimum, 10,000 silver maples weekly until allocations return to normal. Depending on logistics concerns, these will post either Tuesday or Wednesday on a first come, first serve basis. Like the eagles, we will be offering maples in monster box form only until allocations exceed demand.

We have large orders in place now for 100 oz RCM bars (1-2 weeks out).

On gold, the Canadian Mint is behind on its production of gold maples, but we expect to have more in stock Thursday or Friday of this week.

PERTH MINT: The Perth Mint is the only government mint (Australia) that runs its operation like a business. It is one of the primary reasons we promote Perth so heavily. The Perth Mint has swiftly and dramatically increased production to meet demand, and therefore supplies of Perth Mint 1 oz and 10 oz bars, as well as Kangaroos, are in very large supply. We have at least two gold shipments due to arrive this week. If there are any supply constraints, it may appear on fractional gold coins, but it will be only a temporary disruption.

The Perth Mint, unlike the USM and RCM, does not produce a silver monster box. However, we have 15,000 ozs of 10 oz Kookaburra and Kilo Koala coins due to arrive on Tuesday, April 29th.

TEXAS ROUNDS: We sold out of all 50,000 Texas Rounds from our initial mint run in four (4) days. We have another 25,000-30,000 rounds being minted this week, and subsequent runs will continue every other week indefinitely.

MISCELLANEOUS: We have large orders in place with Golden State Mint for buffalo rounds and 1 oz silver bars due to arrive in the next two weeks. The junk silver market for 90% coins is completely depleted, and we are only able to source supply at the present time from customers selling back to us (which are few). We have orders in place for 10 oz NTR bars which we anticipate receiving next week.

We are restocking gold in the next two days, and slowly restocking silver over the course of the next 7-10 days. Be advised that, in some cases, we are selling product faster than we can keep it in stock. Please be patient with our staff if we sell out of the product you want. I reiterate: "If we don't have, we don't sell it."

In conclusion, some have asked me the question: "How can I take advantage of silver at these low prices if you are out of stock on everything?" My only suggestion would apply to those with some trading experience. One option is to buy SLV or Silver Contracts for a short interval at the price point you want, and then sell that position the moment we have physical supply to sell. In this way, you can lock in your spot and buy yourself time until the physical market offers your product.

I would like to personally thank all of our loyal customers for helping us become the fastest growing bullion dealer in North America.